Retail Unbundling - New Jersey

Retail Unbundling - New Jersey
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Status: All residential customers in the State are allowed to choose natural gas suppliers.

Overview: Since January 1, 2000, all residential gas customers of the four local distribution companies in New Jersey (Elizabethtown Gas, New Jersey Natural Gas, Public Service Electric and Gas, and South Jersey Gas) have been able to choose their own gas suppliers. In 2004, about 5 percent of the State's residential customers were buying gas from non-utility suppliers, nearly the same percentage as in 2003. As of December 2008, however, only 56,494 residential customers, or slightly more than 2 percent of the State's residential gas consumers, were buying natural gas from marketers compared with 133,226 in November 2004. Nevertheless, participation has steadily increased since 2005, with residential enrollment totaling about 33,327 in 2005, 37,586 in 2006, and 46,748 in 2007. The sharp increase in natural gas prices during 2005 made it difficult for marketers to honor their contracts with consumers, and South Jersey Energy, an affiliate and major supplier in South Jersey Gas Company's service area, returned its customers to regulated utility sales service. According to State licensing requirements for marketers, customers must receive written notice at least 30 days in advance that a supplier intends to terminate service and be informed, as part of the customer contract, of the circumstances under which service can be terminated. South Jersey Energy began serving residential customers again in 2006 after initiating a price protection service that locked in prices through December 2007. The company instituted a similar plan in 2008 for existing residential customers and intends to expand the program to include new customers in 2009. Ten marketers are licensed to serve residential customers in the State. Commercial and industrial customers in New Jersey have had unbundled service since early 1995.

EIA State Data: In 2007, New Jersey had 2,609,788 residential and 230,855 commercial customers. They consumed approximately 228 and 169 billion cubic feet of natural gas, respectively. The average prices residential and commercial customers paid for natural gas from local distribution companies were $14.48 and $12.10 per thousand cubic feet, respectively. Natural gas sales by marketers are included in the average price paid by residential customers.

Eligibility and Participation in Retail Choice Programs:

All residential gas customers may choose their own gas supplier. Three of the four LDCs serving New Jersey previously offered pilot programs for retail unbundling, beginning in 1997. New Jersey Natural Gas offered a pilot program to 5,000 customers and South Jersey Gas to up to 10,000 customers, while Public Service Electric and Gas (PSE&G) offered its pilot program in only a small portion of its service area. PSE&G ultimately terminated its pilot because of the small amount of customer participation (fewer than 1,000 customers). However, both the New Jersey Natural and South Jersey pilot programs were oversubscribed and enlarged.

Eligibility and Participation by Customer Class, December 2008

Customer Type	2007 Customer Total	Eligible December 2008		Participating December 2008
Customer Type	2007 Customer Total	Total	Percent of Customers	Total	Percent of Eligible	Percent of 2007 Customer Total
Residential	2,609,788	2,616,836	100	56,494	2.2	2.2
Commercial/ Industrial*	238,891	236,420	100	27,877	12.0	11.7
Total	2,848,679	2,853,256	100	84,371	3.0	2.9
New Jersey had 230,855 commercial and 8,036 industrial customers in 2007. Source: 2007 Customer Total:* Energy Information Administration, Natural Gas Annual 2007 (January 2009). Eligibility and Participation: New Jersey Board of Public Utilities (March 2009).

Eligibility and Participation by Local Distribution Company, December 2008

Local Distribution Company	Number of Customers
	Residential		Non-Residential
	Eligible	Participating	Eligible	Participating
Elizabethtown Gas	252,396	734	18,961	2,739
NJ Natural Gas	451,828	12,161	34,868	5,382
Public Service Electric and Gas	1,594,656	18,766	159,341	16,544
South Jersey Gas	317,956	24,833	23,250	3,212
Total	2,616,836	56,494	236,420	27,877
Source: New Jersey Board of Public Utilities (March 2009).

Regulatory and Legislative Actions on Retail Unbundling

Summary: The strong customer response to some of the pilot programs that were initiated in 1997 led the State legislature to enact the "Electric Discount and Energy Competition Act" on February 9, 1999, which called for statewide unbundling of the natural gas industry by December 31, 1999. In January 2000, the Board of Public Utilities approved rate unbundling filings for all four of the State's LDCs, which included incentives for residential customers to switch to third-party suppliers. The billing structure (including who will prepare and send bills) for natural gas customers follows the electricity sales billing model. In September 2000, the Board approved measures that allow enrollment in customer choice programs through the Internet. Previously, a customer's written signature was required before any change could be made and Internet enrollments were limited to 10 percent. The Board's action is in keeping with the Electronic Signatures in Global and National Commerce Act (effective October 2000), which puts Internet transactions on a par with paper transactions

The 1999 legislation also required the Board to determine by January 2002 whether to make competitive basic gas supply service (BGSS) available to any gas supplier or gas utility. On January 17, 2002, the Board ruled that the market was not yet ready for a competitive BGSS structure but encouraged the formation of utility-specific pilot programs subject to certain guidelines. These guidelines include use of a 2-year minimum term, inclusion of at least 25 percent of residential and small commercial customers in the pilot, supplier access to interstate capacity and storage, and uniform pricing for all customers within the same rate class categories and no subsidization.

Regulatory and Legislative Actions

Legislation	02/03	Government Energy Aggregation, A-2165, P.L. 2003. Revises the process for governmental energy aggregation by allowing “all-in/opt out” tool, with the intent of making it easier to negotiate lower energy rates. If a municipality forms an energy pool, it allows all residential customers to be included unless they choose to opt out of the program. Suppliers would have better knowledge of the size of the energy pool, which will simplify rate negotiations. Municipalities will be able to obtain load profile and other customer information in electronic format.
	02/99	The Electric Discount and Energy Competition Act, P.L. 1999. Opens up the State energy industry to competition, mandating restructuring of electric utilities by August 1999 and gas utilities by December 31, 1999. Utilities are to be given the opportunity to recover prudently incurred stranded costs. The Board of Public Utilities is to oversee the restructuring process and to define standards for fair competition, gas affiliate relations, accounting and reporting, and third-party supplier licensing, safety, and service quality. Gas and electric power suppliers must be licensed before they can offer retail services. The act authorizes energy aggregation by private and government entities.
Regulatory Actions	05/08	Board Adopted New Energy Competition Rules. The Board adopted new rules to replace portions of previous energy competition standards. The standards define options for community aggregation programs, require the separation of LDCs and affiliates, and include consumer protection provisions regarding "anti-slamming" for accounts signed up electronically via the Internet. The rules became effective on May 19, 2008, and will expire on April 18, 2011.
	11/07	Proposal to Allow Marketer Access to LDC Customer Information. The Board issued a request for comments to all interested parties concerning a procedure to allow local distribution companies (natural gas and electric) to release customer account information to third-party energy suppliers or clean power marketers.
	07/06	Comments Requested on Marketer Price-Reporting Requirements. The Board seeks comments on price-to-compare procedures that would allow customers to compare marketer and utility price offerings.
	11/04	Ownership Transfer Approved for Elizabethtown Gas. The Board approved the request for AGL Resources to acquire NUI Utilities Inc., doing business as Elizabethtown Gas Company.
	06/03	New Rules Adopted for Government Energy Aggregation Programs. Rules include new procedures and options directed at increasing participation in aggregation programs. Local governments can include all local residential customers unless the individual chooses to “all-in/opt out” of the program. Nonresidential customers would be required to opt-in.
	09/02	Energy Competition Rules Re-adopted with Amendments. Board reviewed its rules on energy competition, interim environmental information disclosure standards, affiliate relations, fair competition and accounting and reporting standards, and interim government energy aggregation program standards.
	04/02	Approval of Transfer of PSE&G Interstate Capacity Contracts to Newco, an Unregulated Affiliate. Board ruled that Newco can provide the interstate capacity, storage, and supply needed for PSE&G to provide basic gas supply service. PSE&G will implement an optional capacity release program to ensure that third-party suppliers can obtain capacity to deliver to their customers on PSE&G's system if needed. The action will move all nonresidential customers to market-based pricing and provide the opportunity to consider similar pricing structures for residential customers. The Division of Ratepayer Advocate had opposed PSE&G's petition.
	01/02	Board Decides Market Not Yet Ready for Competitive Basic Gas Supply Service (BGSS). The Electric Discount and Energy Competition Act specified that by January 1, 2002, the Board of Public Utilities must determine whether to make BGSS available on a competitive basis to any gas supplier, any gas public utility, or both. In an order (Docket GX01050304) issued on January 17, 2002, the Board declined to order competitive BGSS at this time but directed the staff to form a gas policy group to examine pricing and reliability issues that will affect the long-term structure of BGSS. The Board also decided that interested competitive suppliers and utilities could pursue implementation of BGSS pilot programs subject to certain guidelines. These guidelines include use of a 2-year minimum term, inclusion of at least 25% of residential and small commercial customers in the pilot, supplier access to interstate capacity and storage, and uniform pricing for all customers within the same rate class categories and no subsidization.